IPOs can be a risky investment. For the individual investor, it is tough to predict what the stock will do on its initial day of trading and in the near future because there is often little historical data to use to analyze the company. Also, most IPOs are for companies that are going through a transitory growth period, which means that they are subject to additional uncertainty regarding their future values.
For more information, examine on the interesting journey from the pre-IPO stage to the final IPO placement in the primary market: The Road to Creating an IPO and Interpreting a Company's IPO Prospectus Report.
Example of an IPO
The rate of company IPOs often depends on macroeconomic factors as well as internal needs to raise capital. Through the first half of 2016, the amount of companies going public has declined, with total IPO value half of what it was through the first half of 2015. AdvancePierre Food Holdings Inc., a national sandwich and snack producer based in Ohio, announced the initiation of its IPO process on July 5, 2016.
The company is issuing roughly 11 million shares of its own common stock, and current shareholders are selling just over 7.5 million shares of common stock. Public offering price per share is expected to be around $20, raising total funds of around $400 million. Underwriters include Barclays, Credit Suisse and Morgan Stanley.